Events: the company disclosed its 2020 annual report and first quarter 2021 results forecast on March 16 and 17, with revenue of 124 million yuan (- 35.25%), net profit of 24.1929 million yuan (- 60.01%), gross profit of 39.87% (- 20.16pcts) and net profit of 19.78% (- 11.79pcts).
In the first quarter of 2021, the company is expected to achieve operating income of about 30 million yuan, an increase of about 104.86 percent over the same period last year, and is expected to achieve a net profit of 6.5 million yuan to 9.5 million yuan, an increase of 474.14 percent to 646.83 percent over the same period in 2019, and an increase of 3.08 percent to 50.65 percent over the same period in 2019.
Main points of investment:
The company's 2020 performance is greatly affected by the delay of the overall unit development task and delivery plan as well as the epidemic situation, or it may be confirmed across cycles and cashed into future performance.
During the reporting period of the 2020 annual report, the company's revenue was 124 million yuan, down 35.25% from the same period last year, mainly due to the backward adjustment of the overall unit development tasks and delivery plans, as well as the impact of COVID-19 epidemic on the resumption of work and production in related enterprises, and the delayed delivery and acceptance of the company's products. Among them, the company's military revenue (63 million yuan,-63.90%) decreased significantly, especially in the optical guidance system, optical target and scene simulation, and optoelectronic special testing, which accounted for a large proportion of the company's military revenue. We believe that on the one hand, the stereotyped products in the optical guidance system and optoelectronic special testing business are adjusted backward by the overall unit development tasks and delivery plans. on the other hand, the fluctuation of the project cycle and gross profit margin of the optical target and scene simulation system based on R & D products is caused by the fluctuation of the project cycle and gross profit margin of the optical target and scene simulation system, which is accompanied by the delivery of the overall unit of mass production products and the promotion of the progress of R & D products in the future. The above business of the company is expected to have greater restorative growth, which will lead to the rapid growth of the company's overall income.
The estimated net profit of returning home in the first quarter of 2021 is 6.5 million yuan to 9.5 million yuan, an increase of 474.14% to 646.83% over the same period last year, and an increase of 3.08% to 50.65% compared with the same period in 2019. In the first quarter of 2021, the company is expected to achieve operating income of about 30 million yuan, an increase of about 104.86% over the same period last year. The operating income is up from the first quarter of 2020 and is basically the same as that of the first quarter of 2019. This is mainly due to the normal production and operation activities of the company in the first quarter of 2021, and the business for the whole year is expected to improve steadily.
In 2020, the company's expenditure was relatively stable, with a total of 63 million yuan (- 8.49%) in the current period, of which 22 million yuan (- 14.34%) for R & D projects were carried out as planned, with no significant change. The net cash flow generated by the company's operating activities increased by 62.92% compared with the same period last year, mainly due to the increase in sales rebates and government subsidies related to the main business; the net cash flow generated by investment activities was 461 million yuan (+ 162.87%). It is mainly due to the comprehensive impact of the increase in financial products, investment income and the purchase and construction of fixed assets in the previous period of redemption.
At the same time, we noticed that the company's inventory for the current period was 69 million yuan, an increase of 43.77% over the same period last year, of which raw materials, products in stock and goods in stock increased by 27.56%, 38.16% and 204.16% respectively over the beginning of the period, and the advance payment was 16 million yuan, an increase of 122.90% over the same period last year. We believe that the increase in inventory and prepayments shows that the company is fully prepared for on-hand orders. There may be cross-cycle confirmation of the company's 2020 performance, which is expected to be realized to the future performance.
A number of military research and development projects have been steadily advanced, and the company has rapidly expanded its five major businesses: optical target and scene simulation, optical guidance systems, optical special testing, laser countermeasures and civilian products. During the 2020 annual report period, the revenue of military business decreased significantly, and the proportion of military business decreased to 51.17% (- 40.61pcts), although military business was affected by objective factors. However, the company's business and technical areas have achieved a series of technical conquest and key technology verification, including optical target and scene simulation business income of 19.2064 million yuan (- 67.59%) gross profit of 19.10% (- 35.24pcts), several sets of infrared / radar composite simulation system successfully delivered, key technologies have been verified, meet the requirements, and have been recognized by customers.
The business income of the optical guidance system is 20.7574 million yuan (- 73.59%). The gross profit margin is 44.80% (- 15.63pcts). The revenue of optical guidance products is affected due to the delay of the overall unit development task and delivery plan. Optical guidance products are matched with military trade and a number of guidance products used in national military models in the future, with remarkable performance and improved maturity. With the continuous optimization of a number of optical guidance products developed by the overall unit, they have entered the stage of small batch production one after another; at the same time, in line with the needs of the overall unit and the military, actively participate in the demonstration and development of a number of key models, and carry out a large number of scheme argumentation, and won a number of projects.
The business income of optoelectronic special test equipment is 14.4314 million yuan (- 61.29%) and the gross profit is 69.97% (- 3.46pcts). At present, more than 10 supporting tasks of key types of missiles have been completed, providing reliable optoelectronic testing equipment support for many types of weapon systems. The company has the ability to serialize and modularize the optoelectronic special test equipment, and continue to "miniaturize, generalize, serialize and modularize" the optoelectronic special test equipment.
The direction of development.
The business income of the laser countermeasure system is 9.0896 million yuan (+ 1107.39%) gross profit 22.09% (- 5.58pcts). This business develops from the optical system to the whole machine. On the basis of the research and development of the miniaturized control system of the laser system, it has successively completed the development of miniaturized vehicle laser system, portable laser system and airborne laser system. Laser countermeasure system revenue growth, the follow-up will be introduced into mass production, and then help to improve performance. Affected by the rapid development of UAV during the reporting period, there is an urgent demand for high-precision and low-cost air defense systems, which highlights the characteristics of laser weapons with the integration of inspection and combat, low cost and high efficiency. High-power, long-distance, multi-band integrated optoelectronic countermeasure and hard damage capability have become the trend of technological development. Vehicle platform technology has become mature, airborne platform system has become a new breakthrough direction of technology development, and is expected to become a new performance growth point of the company in the future.
During the reporting period, the company's civil products business income of 56.3105 million yuan (+ 408.34%) gross profit margin of 38.49% (- 5.93pcts), civilian products are mainly used in the field of power system, forest fire prevention and human temperature measurement. The company combines its own technical advantages in the field of body temperature intelligent monitoring to combat the epidemic, forms a certain batch of sales, and constantly iterates the products to increase its function in the post-epidemic stage, provide value-added services, achieve income of 31.0434 million yuan, and increase the proportion of civilian business income to 45.38% (+ 39.60pcts). During the reporting period, in line with the enterprise concept of giving back to the society, actively participated in the donation activities of the Red Cross Society of Heilongjiang Province to schools in poor counties and sold products to the Red Cross Society at lower prices, resulting in a decline in the overall profit level of civilian products. the impact is expected to be limited in the future. At the same time, excluding the income from epidemic products, the company's civil product income also increased significantly by 128.07% compared with last year, among which, during the reporting period, power system products gradually realized the installation and use of forest fire prevention intelligent monitoring system in many substations in Heilongjiang Province for Nanjing, Guangdong and other places. After the upgrading of the image processing software in the natural environment of the Yangtze River Delta region, the intelligent monitoring system for forest fire prevention has developed the image processing software in the natural environment of the Pearl River Delta region and delivered it to customers. The company's civilian products are constantly expanding to meet the needs of customers, constantly upgrade and improve product performance, and increase market promotion.
The business layout has achieved remarkable results, and the signing of new contracts and winning orders are good for future development during the reporting period, the company's national layout has achieved initial results, and the business expansion in northwest and southwest has increased significantly, by 849.98% and 462.90% respectively, realizing the company's strategic intention to provide products and services for the aerospace industry and expand into more military fields.
On November 6, the company announced that it won the bid to build the XX system and the optical target simulation subsystem in the infrared XX environment, with the winning amount of 36.85 million yuan and 8.8 million yuan respectively. We believe that the winning large amount of optical simulation business shows that the cycle of the company's research investment in optical objectives and simulation business has achieved phased results, and the future development of this business will produce performance assistance. The contract for the production of XX long-wave infrared imaging optical lenses was disclosed on December 19, with a contract amount of 74.25 million yuan, which is expected to have a positive impact on the company's performance.
The company implements stock incentives to enhance the enthusiasm of employees, and the signing of new contracts and winning orders are more conducive to future development.
The company launched the 2020 restricted stock incentive plan, in which 31 incentive targets (accounting for 8.73% of the company's total employees) were granted 800000 restricted shares for the first time, accounting for about 0.80% of the company's share capital, with a grant price of 14.8 yuan per share. This plan will further enhance staff cohesion and team stability, fully mobilize the enthusiasm and creativity of employees, so as to improve business efficiency and bring higher business performance and intrinsic value to the company.
Investment suggestion
We believe that 1) the company has been deeply ploughing the field of precision guided weapons for many years, and is a qualified supplier to many central military enterprises, such as aerospace science and technology, aerospace science and technology, and so on, and its business covers many positions in the industrial chain of precision guided weapon systems. under the background of the whole army vigorously carrying out actual combat training and the rapid development of weapons and equipment construction, the procurement demand of missiles as consumptive weapons may increase rapidly in the future. Promote the rapid growth of the company's demand for supporting products around missile weapon systems. 2) in addition to the field of precision guided weapons, the company has also begun to expand into other military fields, especially the aviation field, which will also contribute to the growth of the company's military business income; 3) under the background of COVID-19 's epidemic situation, the intelligent detection of human body temperature developed by the company to meet the needs of temperature screening in public places during the epidemic will become a regular demand with the normalization of epidemic prevention. 4) the company implements a restricted stock incentive plan to fully mobilize the enthusiasm and creativity of employees; 5) most of the company's optical guidance systems and optoelectronic professional test equipment are in the finalization stage, and some products have been approved. Although the overall unit development tasks and delivery plans have been adjusted backward in 2020, resulting in a significant decline in performance, business income is expected to be realized across cycles, and the company's future performance is expected to show compensatory growth.
Based on the above point of view, we estimate that the operating income of the company from 2021 to 2023 will be 278 million yuan, 414 million yuan and 607 million yuan respectively, the net profit will be 71 million yuan, 110 million yuan and 158 million yuan respectively, and the EPS will be 0.71 yuan, 1.10 yuan and 1.58 yuan respectively. We have a "buy" rating with a target price of 51.60 yuan, corresponding to 73 times, 47 times and 33 times PE of projected earnings for 2021-2023.
Risk tips: the progress of military research and development is not as expected, the continuous expansion of civilian products is not as expected, the procurement demand of military customers is volatile, and the progress of raising investment in projects under construction is not as expected.